U.S. CPI continues to rise: how Bitcoin can save us from inflation

In a world where the problem of capital mismatch is severe, Bitcoin, a store of value, brings us hope.

According to the US Consumer Price Index (CPI, reflecting changes in the price levels of consumer goods and services generally purchased by households) in June, consumer prices rose by 5.4% year-on-year in June this year. This is since August 2008. The biggest monthly increase since. The rise in residents’ wages was largely offset by the rise in the prices of these consumer goods, because people’s daily necessities are increasing. Inflation is becoming a trend. Part of the reason for the soaring CPI is that the global economy experienced a large-scale supply and demand shock last year. Taking into account the weakness of the US production side, the increase in inflation seems logical.

U.S. CPI continues to rise: how Bitcoin can save us from inflation

This is the worst inflation in three years. Source: Twitter

Below I will briefly explain what inflation is.

The common definition of inflation is rising prices. To some extent, it is true. Inflation does mean that prices are rising steadily over time, but this argument ignores the causes of inflation, which is the crux of the problem.

Strictly speaking, most of the currency in the United States is made through computers, and the Fed can make endless amounts of cash. Looking at this chart, the money supply in the United States will only rise because of the Federal Reserve.

U.S. CPI continues to rise: how Bitcoin can save us from inflation

Federal Reserve Balance Sheet Source: Bloomberg, Wells Fargo Investment Research Institute, 2021.7.7

The Federal Reserve controls the money supply in the United States and purchases assets on the balance sheet. In 2006, its balance sheet was less than 900 billion U.S. dollars, but during the 2008 economic crisis, the balance sheet exceeded 2 trillion U.S. dollars; as of June 2021, the value of assets on the balance sheet was approximately 8 trillion. Dollar. The Fed has actually increased its balance sheet by 10 times! This shows that the Fed’s pace of printing money to buy bonds has accelerated, and it has objectively pushed up the asset prices of all investment tools.

In an economy, an increase in the money supply will push up asset prices and consumer prices. So since 2008, asset prices have been rising. This of course also includes Bitcoin, because it is currently being used as a currency by retail investors, institutional investors and even some countries. In addition, the stock market, especially the S&P 500 Index, refreshes its all-time high almost every other day.

U.S. CPI continues to rise: how Bitcoin can save us from inflation

2020-2021, the S&P 500 Index will rise significantly Source: New York Stock Exchange

Since the sell-off in March 2020, the S&P 500 Index has risen about 100%, which means that every dollar invested in it will get a return of $2. The Fed injected unprecedented liquidity into the financial markets, which caused asset prices to rise.

At present, the inflation caused by government-issued currency is very serious all over the world, and there are signs of intensifying. 35% of all additional U.S. dollars issued by the U.S. government in history were printed between March and December 2020. The US dollar continues to flow into the market like melting ice. A statistic shows that about 47% of Americans have not made any investment. Unlike investors who use currency as a bargaining chip, the stored value of currency in these Americans has been eroded, and they are truly affected by the crazy printing of US dollars. harm.

As mentioned earlier, Bitcoin is also experiencing inflation and has gained a lot of benefits from it. However, I want to point out the key difference between Bitcoin and other assets-since its inception, Bitcoin is the easiest asset to invest in because it was born for the digital world.

Tens of thousands of nodes distributed all over the world ensure the security of the Bitcoin protocol, and anyone can participate in and protect the Bitcoin network. Because of this, the Bitcoin network can operate normally and can withstand any single point of failure.

Bitcoin is the first existing asset with a clear supply cap. No matter how many people join the network, no matter how much the value of bitcoin rises, or how advanced the mining equipment is, the number of bitcoins will never exceed 21 million. If someone wants to increase supply, they must break through thousands of full nodes. Due to strict restrictions on the supply of Bitcoin, it is technically impossible to increase the supply to match the rising demand. In this way, Bitcoin has become a brand new asset class, and it may be one of the most effective forms of value storage in history. The monetary policy implemented by Bitcoin through code is far superior to that of the central bank.

Since the beginning of government issuance of currency, countries around the world have been troubled by unlimited government printing of money. The current monetary system is not designed for success, but only to postpone its ongoing and inevitable destruction.

Let’s do a simple math problem:

How much is infinity divided by 21 million?

In other words, with unlimited money printing currency and a constant total of 21 million bitcoins, who would you choose?


Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/u-s-cpi-continues-to-rise-how-bitcoin-can-save-us-from-inflation/
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